How Amazon Is Holding Hachette Hostage

For some three weeks now, books from the Hachette publishing group – one of the "big five" publishers who dominate the globe – have been largely unavailable through Amazon.com. Amazon has taken away the pre-order buttons on forthcoming Hachette titles, and current Hachette titles are either not for sale (Amazon helpfully recommends used copies from its reseller network, as well as similar books from competing publishers), or are listed as being out of stock for the next several weeks.

The action was precipitated by the failure of Amazon and Hachette to come to terms on their next ebook sales-deal. Amazon is far and away the most successful ebook retailer in the world, and Hachette, like all the major publishers, depends on ebook revenue as a key piece of its bottom line. As the dispute drags on, it's becoming clear that Hachette needs Amazon more than Amazon needs Hachette.

In a sane world, Hachette would have a whole range of tactics available to it. Amazon's ebook major competitors – especially Apple and Google – have lots of market clout, and their customers are already carrying around ebook readers (tablets and phones). Hachette could easily play hardball with Amazon by taking out an ad campaign whose message was, "Amazon won't sell you our books – so we're holding a 50% sale for anyone who wants to switch to buying ebooks from Apple, Google, Kobo or Nook."

It was a tactic similar to this that gave rise to the Amazon MP3 store. The record labels were upset with Apple's insistence that all tracks must be sold separately at $0.99, and wanted to vary the price at which their top titles and back catalogue were listed. When Apple refused to budge, Amazon leapt into the fray with the MP3 store, whose products could be readily loaded into Itunes and onto iPods, because the MP3s were sold without "Digital Rights Management" – the technology that was used to lock music to the Apple ecosystem. Indeed, Amazon's slogan of the day was Don't Restrict Me.

But it is precisely because Hachette has been such a staunch advocate of DRM that it cannot avail itself of this tactic. Hachette, more than any other publisher in the industry, has had a single minded insistence on DRM since the earliest days. It's likely that every Hachette ebook ever sold has been locked with some company's proprietary DRM, and therein lies the rub.

Under US law (the 1998 Digital Millennium Copyright Act) and its global counterparts (such as the EUCD), only the company that put the DRM on a copyrighted work can remove it. Although you can learn how to remove Amazon's DRM with literally a single, three-word search, it is nevertheless illegal to do so, unless you're Amazon. So while it's technical child's play to release a Hachette app that converts your Kindle library to work with Apple's Ibooks or Google's Play Store, such a move is illegal.

It is an own-goal masterstroke. It is precisely because Hachette has been so successful in selling its ebooks through Amazon that it can't afford to walk away from the retailer. By allowing Amazon to put a lock on its products whose key only Amazon possessed, Hachette has allowed Amazon to utterly usurp its relationship with its customers. The law of DRM means that neither the writer who created a book, nor the publisher who invested in it, gets to control its digital destiny: the lion's share of copyright control goes to the ebook retailer whose sole contribution to the book was running it through a formatting script that locked it up with Amazon's DRM.

The more books Hachette sold with Amazon DRM, the more its customers would have to give up to follow it to a competing store.

Hachette is the first of the big five to have its deal with Amazon come up for renegotiation since Apple and the major publishers settled an anti-trust suit with the US Department of Justice, and whatever terrible deal Hachette objected to is surely about to be crammed down the throats of the other four, all of whom are using DRM for some or all of their catalogues.

However, there's still time. The Macmillan imprint Tor Books – the largest science fiction publisher in the world, and the publisher of my US novels – gave up DRM on its entire catalogue two years ago. Each year since, the company has reported strong increases in ebook sales and no rises in piracy levels. If Macmillan – or its rivals – want to avoid the Hachette trap, now is the time. Push out the entire catalogue without DRM, now, and arm yourself with an "Amazon Refugee" app that can convert all your Kindle books to run on anyone else's platform, ready to release the very instant Amazon tries this trick again.

Hachette's parent company, Lagardère, is a diversified multinational, so you'd think they'd be a little more strategic about this whole thing. But Amazon has its own space programme and is clearly thinking about a bigger picture than Lagardère can put in scope.

Disclosure: Jeff Bezos is an investor in Business Insider through his
personal investment company Bezos Expeditions.